Sunday, March 18, 2012

Development Banks Go African & Latin: PEU Party Time

Western development banks, backed by western governments, look to diversify by investing in international developing markets. Financial Newsreported how private equity underwriters (PEUs) benefit:

A range of industry players, including US giant Carlyle Group and 8 Miles, the vehicle set up by former pop artist and campaigner Bob Geldof, are raising funds dedicated to Africa, while 3i Group, Hamilton Lane and Advent International are among the firms to have expanded their presence in Latin America in the past 12 months.

Development finance institutions are backed by North American and western European governments that invest in emerging markets through private equity, real estate infrastructure, debt and equity investments. They are the most long-standing backers of private equity within the African continent.

Two other features in the piece are worth noting. First:

DFIs are typically “for-profit” organisations, but any returns made are ploughed back into future investments rather than providing governments with dividends.

All risk, no reward. That fits with the 2008 financial meltdown where profits are privatized and losses socialized.

Second:

A number of private equity firms are keen to ensure they are not seen as using tax havens to avoid paying tax.

How long can PEU's benefiting from government largess use tax havens? Peruse through Carlyle's eleven pages of subsidiaries, many located in well known tax havens. The Cayman Islands houses nearly 150 Carlyle Group subsidiary corporations.

This fact is never mentioned when reporters or President Obama fawn over David Rubenstein, Carlyle's most public co-founder. Did President Obama raise his tax haven concern at the January 2011 State Dinner, where he invited Mr. & Mrs.David Rubenstein? Doubtful, given Rubenstein's visit was a follow up to a December 2010 event: President Obama gave a shout out to Rubenstein:

None of this would be possible without some people who have put great effort into this evening -- David Rubenstein, Michael Kaiser, the Kennedy Center trustees, and all the people who have made the Kennedy Center such a wonderful place for Americans of all ages to enjoy the arts.

There's a huge difference between Obama's campaign rhetoric and delivering for the Government Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids..

Note: The Carlyle Group's 2011 Income before Provision for Income Tax was nearly $1.2 billion. Carlyle paid $28.5 million in income taxes to Uncle Sam, a rate of 2.4%

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